FEDERAL COURT OF AUSTRALIA Higgins v Hancock as Liquidator of 246 Arabella Investments Pty Limited (in liq) [2011] FCA 1119 Citation: Higgins v Hancock as Liquidator of 246 Arabella Investments Pty Limited (in liq) [2011] FCA 1119 Parties: CHRISTOPHER LYNDON HIGGINS v GEOFFREY TRENT HANCOCK AS LIQUIDATOR OF 246 ARABELLA INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 001 085 481, ADMINISTRATIVE APPEALS TRIBUNAL and COMMISSIONER OF TAXATION File number: NSD 1588 of 2011 Judge: EDMONDS J Date of reasons for judgment: 30 September 2011 Catchwords: JUDICIAL REVIEW – s 39B(1A)(c) of the Judiciary Act 1903 (Cth) – application for judicial review of decision of Administrative Appeals Tribunal to refuse an application to adjourn proceedings part heard in the Tribunal – Commissioner of Taxation sought to cross-examine the applicant on documents not included in T-documents – tender of those documents by the Commissioner ultimately rejected by Tribunal – Tribunal ruled it would not give consideration to applicant's answers in cross-examination and ruled parts of the transcript be expunged or restricted – review on grounds of denial of natural justice and failure to take into account relevant consideration Held: application dismissed, neither ground made out Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) s 5 Administrative Appeals Tribunal Act 1975 (Cth) s 44 Judiciary Act 1903 (Cth) s 39B(1A)(c) Cases cited: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 applied Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 cited Denlay v Commissioner of Taxation (2011) 193 FCR 412 cited Geographical Indications Committee v The Honourable Justice O'Connor (2000) 64 ALD 325 applied Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566 applied Kioa v West (1985) 159 CLR 550 cited Maxwell v Keun [1928] 1 KB 645 cited Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 applied Sali v SPC Ltd (1993) 116 ALR 625 cited Sean Investments Pty Ltd v MacKellar (1981) 38 ALR 363 applied Date of hearing: 21 September 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 68 Counsel for the Applicant: Mr J Stoljar SC with Mr J Hyde Page Solicitor for the Applicant: Argyle Lawyers Pty Ltd Solicitor for the First Respondent: Eakin McCaffery Cox Counsel for the Third Respondent: Mr D McGovern SC with Ms J Gleeson Solicitor for the Third Respondent: ATO Legal Services Branch IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1588 of 2011 BETWEEN: CHRISTOPHER LYNDON HIGGINS Applicant AND: GEOFFREY TRENT HANCOCK AS LIQUIDATOR OF 246 ARABELLA INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 001 085 481 First Respondent ADMINISTRATIVE APPEALS TRIBUNAL Second Respondent COMMISSIONER OF TAXATION Third Respondent JUDGE: EDMONDS J DATE OF ORDER: 21 SEPTEMBER 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the third respondent's costs, as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1588 of 2011 BETWEEN: CHRISTOPHER LYNDON HIGGINS Applicant AND: GEOFFREY TRENT HANCOCK AS LIQUIDATOR OF 246 ARABELLA INVESTMENTS PTY LIMITED (IN LIQUIDATION) ACN 001 085 481 First Respondent ADMINISTRATIVE APPEALS TRIBUNAL Second Respondent COMMISSIONER OF TAXATION Third Respondent JUDGE: EDMONDS J DATE: 30 SEPTEMBER 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On Wednesday, 21 September 2011, I dismissed an application for review of a decision of the Administrative Appeals Tribunal ('the Tribunal'), constituted by Senior Member SE Frost, to refuse an application for an adjournment of proceedings Nos. 6058 – 6068 of 2009 ('the AAT proceedings'). At the time, I indicated that I would publish my reasons for doing so at an early date, and I now do so. Background 2 The background to this application is set out in an affidavit sworn by the solicitor for the applicant on 19 September 2011 and read without objection. Relevantly, that background is paraphrased below. 3 The applicant is a director of 246 Arabella Investments Pty Limited (in liquidation) ('Arabella'). The shareholder of Arabella is HFGC Nominees No. 2 Pty Ltd as trustee for the C L Higgins Family Trust. The applicant is a beneficiary of that trust fund. 4 On 26 October 2007, the applicant was appointed liquidator of Arabella by resolution of the members of the company. 5 On 3 November 2008 and 4 November 2008 the third respondent ('the Commissioner') issued notices of assessment to Arabella in respect of the years of income ended 30 June 1993 to 30 June 2003 (inclusive) ('the assessments'). 6 On 9 December 2008, Arabella lodged notices of objection against the assessments ('the objections'). 7 On 15 December 2008, the applicant resigned from the office of liquidator of Arabella and Geoffrey Trent Hancock and Alan Godfrey Topp were appointed joint liquidators of Arabella. On 2 April 2009 Mr Topp resigned as liquidator of Arabella. 8 On 6 November 2009, the Commissioner disallowed the objections ('the objection decisions'). 9 On 21 December 2009, the applicant commenced the AAT proceedings against the Commissioner for a review of the objection decisions pursuant to Pt IVC of the Taxation Administration Act 1953 (Cth). 10 The AAT proceedings were subsequently stayed pending an application by the applicant to this Court to seek leave to pursue the AAT proceedings in the name of Arabella. Such a course was required as the liquidator of Arabella refused to pursue the proceedings on behalf of Arabella. 11 On 14 September 2010, Perram J granted leave to the applicant to pursue the AAT proceedings in the name of Arabella. 12 On 21 October 2010, the Commissioner filed and served two volumes of documents pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth) ('the T Documents') in the AAT proceedings. 13 On 24 November 2010, Arabella filed and served its statement of facts, issues and contentions in the AAT proceedings. 14 On 8 December 2010, the Tribunal made an order that the Commissioner file and serve any material on which he intended to rely 14 clear days before the hearing. The AAT proceedings were listed for a 7 day hearing commencing on 22 August 2011. 15 On 16 December 2010, the Commissioner filed and served his statement of facts, issues and contentions in the AAT proceedings. 16 On 6 July 2011, the applicant's solicitor caused a letter to be sent to the Australian Taxation Office ('the ATO') repeating an earlier request for full particulars of all documents upon which the Commissioner intended to rely in the AAT proceedings. 17 On 14 July 2011, the ATO sent a letter in response. 18 On 12 August 2011, the applicant's solicitor caused a letter to be sent to the ATO requesting that the Commissioner indicate whether he intended to rely on any further documents than those already filed and served in the AAT proceedings. 19 On 15 August 2011, the ATO sent a letter in response. 20 On 22 August 2011 to 30 August 2011, Arabella's application for review of the objection decision in the AAT was part-heard before Senior Member Frost. 21 On 24 August 2011, the Commissioner's senior counsel sought to cross-examine the applicant in respect of a bundle of documents that had not previously been provided to the applicant, either before or during the AAT proceedings. These documents originally formed part of a larger bundle of documents referred to as MFI-3 in the AAT proceedings. The documents were subsequently taken out of MFI-3 and marked MFI-4 in the AAT proceedings (the 'MFI-4 Documents'). 22 The questioning on the MFI-4 Documents was subject to an objection from counsel for Arabella and Senior Member Frost requested an explanation as to why the MFI-4 Documents had not been included in the T-Documents. The Senior Member further invited the Commissioner to put on evidence establishing the authenticity of the MFI-4 Documents. 23 On 25 August 2011, senior counsel for the Commissioner indicated that the MFI-4 Documents had been disseminated to the Commissioner by the Australian Crime Commission and that the MFI-4 Documents had originated from the laptop computer of Mr Phillip Egglishaw. 24 On 26 August 2011, Counsel for Arabella raised concerns that the MFI-4 Documents may have been obtained pursuant to a search warrant issued under Pt 1AA of the Crimes Act 1914 (Cth) and requested evidence that those documents could be deployed in civil proceedings. 25 On 30 August 2011, the Commissioner filed and served an affidavit of an officer of the ATO sworn the same day which deposed to the origin of the MFI-4 Documents. 26 This affidavit was not formally read in the AAT proceedings and Senior Member Frost ultimately rejected the tender by the Commissioner of the MFI-4 Documents. Arabella also applied for a ruling that the parts of the transcript of the cross-examination of the applicant concerning the MFI-4 Documents be excluded or restricted. No ruling was made in relation to this application and the AAT proceedings were adjourned to 15 September 2011. 27 On 9 September 2011, Arabella applied to the Tribunal for a Summons to be issued to the Commissioner and a Summons to be issued to the Australian Crime Commission. The applications to issue the Summons were heard on 12 September 2011 before Senior Member Frost. 28 On 13 September 2011, Senior Member Frost refused Arabella's applications for the issue of the Summons. 29 On 15 September 2011, the applicant filed an application in this Court (NSD 1570 of 2011) for preliminary discovery against the Commissioner and the Australian Crime Commission. It is said, that application needs to be supplemented by a further affidavit as a substantial number of matters were unable to be disclosed due to the implied undertaking of confidentiality that is upon the parties in the AAT proceedings. 30 On 15 September 2011, Arabella renewed its application in the Tribunal that the parts of the transcript concerning the MFI-4 Documents be expunged or restricted and further that the Tribunal make no use of the applicant's responses to questions in cross-examination that concerned the MFI-4 Documents in the AAT proceedings. 31 Senior Member Frost ruled as follows in respect of this application: (1) that the Tribunal would not give any consideration to the applicant's answers to the questions concerning the MFI-4 Documents; and (2) that the parts of the transcript in the AAT proceedings concerning the cross-examination of the applicant in relation to the documents marked as MFI-4 be restricted to the applicant's and the Commissioner's counsel and those instructing, and those parts of the transcript are not to be used for any other purposes than the AAT proceedings, or an appeal therefrom. 32 Arabella then applied for an adjournment of the AAT proceedings in light of the application for preliminary discovery that had been made in proceeding NSD 1570 of 2011 by the applicant earlier that day (see [29] above). This application was made because of concerns that the continuation of the AAT proceedings may impact upon the applicant's rights in this Court. 33 Senior Member Frost refused to grant the adjournment but indicated that he was prepared to allow a shorter adjournment to give Arabella time to seek review by this Court of his refusal. Arabella indicated that it wished to take that course and the AAT proceedings were adjourned to 22 September 2011 to enable this to occur. The Applicant's Originating Application in this Court 34 The applicant's originating application in this Court for judicial review of the Tribunal's decision to refuse the adjournment application seeks to invoke the jurisdiction of the Court under: (1) Section 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('the ADJR Act'); (2) Section 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ('the AAT Act'); and (3) Section 39B(1A)(c) of the Judiciary Act 1903 (Cth). 35 The application was not pressed in so far as it was brought under s 44 of the AAT Act, for the reasons set out in Geographical Indications Committee v The Honourable Justice O'Connor (2000) 64 ALD 325 at [19]. 36 Nor, having regard to what was said in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, in particular by Mason CJ at 337 – 338, was the jurisdiction of the court under s 5 of the ADJR Act pressed; and the court's jurisdiction under s 6 of that Act was not invoked: see the observations of the Full Court in Geographical Indications Committee at [20]. 37 However, it was common ground that the court had jurisdiction to review the Tribunal's decision in reliance on s 39B(1A)(c) of the Judiciary Act. Grounds 38 The grounds of the application were that the refusal to grant an adjournment was erroneous because: (1) It constituted a breach of natural justice; (2) It was an improper exercise of power (among other reasons because of a failure to take relevant considerations into account); (3) It was otherwise contrary to law. 39 The first ground was pressed. The second ground was only pressed on the basis of a failure to take into account relevant considerations. The third ground was not particularised and not pressed. The Applicant's Submissions 40 The applicant acknowledged that an appellate court will be slow to interfere with the discretion of a trial judge to refuse an adjournment (Maxwell v Keun [1928] 1 KB 645 at 650, 657, 658). Nevertheless, he submitted that an appellate court will do so if the refusal will result in a denial of justice to the applicant and the adjournment will not result in any injustice to the other party: Sali v SPC Ltd (1993) 116 ALR 625 at 628. According to the applicant, each of these criteria is satisfied in the present case. Ground (1): Breach of Natural Justice 41 The applicant submitted that, for the reasons explained in Kioa v West (1985) 159 CLR 550 at 629, to compel Arabella to proceed to a final determination of the AAT proceedings without the opportunity to deal fairly and fully with the material apparently available to the Commissioner, and deployed by him in the AAT proceedings, was a breach of natural justice. The applicant should not be required to proceed to the conclusion of the AAT proceedings in circumstances in which a number of documents, said to be adverse to Arabella or Mr Higgins, have been available to the Commissioner but not the applicant, and have been deployed by the Commissioner in the litigation. 42 The applicant submitted that, after reviewing the MFI-4 Documents in their proper context, Arabella may wish, for example, to apply to put on more evidence or make further submissions in respect of the provenance of the MFI-4 Documents, or to amplify or explain evidence that has been given, or to put certain answers presently given in cross-examination into context. 43 The applicant acknowledged that Senior Member Frost had sought to alleviate Arabella's position by expunging or restricting parts of the transcript. But that step, while admittedly to some extent of benefit to Arabella, does not, according to the applicant, remedy the failure to observe natural justice. This very issue was addressed in the passage from the reasons of Brennan J (as his Honour then was) in Kioa (at 629) to which reference was made above: 'Nevertheless in the ordinary case where no problem of confidentiality arises an opportunity should be given to deal with adverse information that is credible, relevant and significant to the decision to be made. It is not sufficient for the repository of the power to endeavour to shut information of that kind [ie, information adverse to the applicant] out of his mind and to reach a decision without reference to it. Information of that kind creates a real risk of prejudice, albeit subconscious, and it is unfair to deny a person whose interests are likely to be affected by the decision an opportunity to deal with the information. He will be neither consoled nor assured to be told the information was left out of account. The allegation in par. 22 was apparently credible, relevant and damaging. The failure to give Mr. Kioa an opportunity to deal with it before making an order that Mr. and Mrs. Kioa be deported left a risk of prejudice which ought to have been removed. There was nothing in the circumstances of the case – neither in the administrative framework created by the Act nor in any need for secrecy or speed in making the decision – which would have made it unreasonable to have given Mr. and Mrs. Kioa that opportunity. The failure to give Mr. Kioa that opportunity amounts to a non-observance of the principles of natural justice. The result is that the condition governing the power to make the deportation orders was not satisfied and the orders must be set aside. If the Minister chooses to do so, a fresh decision may be made. There is nothing in these reasons which affects the merits of the decision made or of any decision which may be made in the future.' 44 The applicant observed that the cross-examination had already taken place and the answers had already been given; it may not be easy now for that material to be excluded from the mind of the Senior Member. According to the applicant, at the very least Arabella needs the opportunity to consider the information and its provenance fully and fairly, and to take any further steps or make any further application which would appear appropriate after that process has been undertaken. Ground (2): Improper Exercise of Power 45 Secondly, it was submitted that the Tribunal's decision on 15 September 2011 to refuse the adjournment application was an improper exercise of power by reason, among other things, of a failure to take relevant considerations into account. 46 According to the applicant, this point relies on many of the same matters as those set out above. In addition, in considering whether or not to accede to the application for an adjournment, the Tribunal should have had regard to the circumstances generally then obtaining, including consideration as to whether any prejudice to the Commissioner in granting the adjournment would be outweighed by the prejudice to Arabella in requiring the AAT proceedings to continue. 47 The applicant submitted that the latter step would have required a weighing up of relevant discretionary considerations, all of which favour the granting of the adjournment, as follows: (1) The granting of an adjournment could not have occasioned any detriment to the Commissioner. In the ordinary course the Commissioner has the benefit of the assessments unless and until they are set aside. (2) The AAT proceedings have reached the stage of final submissions. No witness's evidence or cross-examination will be interrupted. There does not appear any overwhelming speed in the decision-making (see Kioa at 629) such as would compel a final decision in advance of the applicant taking the further steps that have been foreshadowed. (3) Further, to some extent at least the Commissioner has contributed to the situation now arising. The Commissioner declined to make available to Arabella the documents on which it sought to rely and deploy in cross-examination, possibly because the Commissioner sought to maximise the effect of those documents in cross-examination. For present purposes the short point is that, if a party adopts a strategy of declining to make documents available, it should not be heard to complain later about an adjournment arising from the use of those documents. (4) Arabella would be happy to prosecute its application for preliminary discovery with expedition. Commissioner's Submissions 48 I have not separately set out the Commissioner's submissions because to a large extent, if not wholly, they are subsumed in the Court's reasons for rejecting the applicant's submissions in the course of reaching its conclusion to dismiss the application. Consideration and Analysis Alleged denial of natural justice 49 Broadly, natural justice is the right to be given a fair hearing and the opportunity to present one's case, the right to have a decision made by an unbiased or disinterested decision-maker and the right to have that decision based on logically probative evidence. 50 None of the matters raised in the applicant's outline of submissions suggests that there was any denial of natural justice in the refusal to grant an adjournment. To the contrary, the suggestion appears to be that the Tribunal failed to take into account a matter that was not even put to it. 51 The claimed denial of natural justice is said to arise out of the loss of an opportunity on the part of Arabella to deal fairly and fully with the material deployed by the Commissioner in the AAT proceedings, namely, the MFI-4 Documents. 52 When making the adjournment application, it was not suggested by counsel for Arabella that it sought an opportunity to deal further with the MFI-4 Documents in the AAT proceedings. This is not surprising since the MFI-4 Documents were not admitted into evidence, Arabella having successfully opposed their tender. 53 The adjournment application was made after the purpose of the preliminary discovery proceedings (see [29] above) was identified as being to determine whether there was 'a cause of action … to impugn the – or set aside the assessments raised ... in 2008 on the basis that they may have been raised under the influence of documents – MFI-4 documents obtained illegally' (Transcript 15.9.11, p 10, lines 13 – 15). 54 Although the position is not entirely clear, counsel for Arabella appeared to articulate three reasons for an adjournment of the AAT proceedings: (1) to avoid the possibility of waiving some right, apparently in relation to a future challenge to the validity of the assessments, by making final submissions in the AAT proceedings (Transcript 15.9.11, p 12, line 45 to p 13, line 6); (2) to avoid the work involved in deciding the AAT proceedings in the event that they became otiose as a result of the assessments having been set aside (Transcript 15.9.11, p 13, lines 6 – 23); and (3) to enable the Tribunal to consider whether it should make an order permitting Arabella to use the MFI-4 Documents for the purpose of the preliminary discovery proceedings (Transcript 15.9.11, p 13, lines 38 – 40). 55 What is clear is that counsel for Arabella did not make any submission to the effect that an opportunity was sought to deal further with the MFI-4 Documents or other documents in the AAT proceedings. 56 The documents which are said to be adverse to Arabella or the applicant (see [41] above) are not identified. They cannot be the MFI-4 Documents because those documents were provided to Arabella. 57 The applicant's submission at [42] above raises possibilities that were not identified to the Tribunal for the purpose of the adjournment application. The possibility that there is some 'context' in which the documents need to be understood has not previously been raised. Nor has there been a suggestion that there was no opportunity to deal with the documents. The applicant was given an opportunity to deal with the documents in cross-examination. To date, the sole question has been whether the MFI-4 Documents have been used in breach of any law. The Commissioner told the Tribunal that there has been no such breach. 58 Arabella received the MFI-4 Documents on 23 August 2011, almost one month ago. No reasons are given for the contention that it needs further time to consider the information in those documents. In any event, this was not a matter raised with the Tribunal in relation to the adjournment application. 59 Nor are reasons given for the asserted need to consider further the provenance of the documents. Nor was this matter raised in support of the adjournment application. 60 For these reasons, I am of the view that this ground has no foundation and cannot sustain the application. Alleged failure to take into account a relevant consideration 61 The ground of failure to take into account a relevant consideration will only be made good if it is shown that the decision-maker has failed to take into account a consideration which he was, in the circumstances, bound to take into account for there to be a valid exercise of the power to make the decision: Sean Investments Pty Ltd v MacKellar (1981) 38 ALR 363 at 375 per Deane J; Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40. 62 The applicant has not identified any consideration which Senior Member Frost was bound to take into account, but which he failed to take into account in refusing the adjournment application. 63 Again, this ground cannot sustain the application. Other matters relevant to the application for judicial review 64 As noted in [53] above, the stated purpose of the preliminary discovery proceedings is to determine whether Arabella may bring proceedings challenging the validity of the assessments that are the subject of the AAT proceedings. 65 The grounds for a challenge to the validity of an assessment are strictly limited: Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146. Even if circumstances in which information becomes available to the Commissioner's officers involved unlawful conduct on their part, that would not necessarily deny the integrity of the assessment: Denlay v Commissioner of Taxation (2011) 193 FCR 412 at [79]. 66 Further, there is no reason to believe that documents obtained under preliminary discovery will be relevant to the AAT proceedings. The question of the validity of the assessments is not a matter within the scope of the Tribunal's jurisdiction: Kennedy v Administrative Appeals Tribunal (2008) 168 FCR 566 especially at [11], [22] and [27]. In Pt IVC proceedings, the existence of an inadmissible purpose or other matter affecting the validity of an assessment is not a relevant issue. 67 Taking these matters into account, the suggestion that Arabella has been denied natural justice (even if it had been made to the Tribunal) would require more than an unparticularised assertion, without any evidentiary foundation, that Arabella requires a further opportunity to present its case in relation to the MFI-4 Documents. Conclusion 68 For all these reasons, the application must be dismissed with costs. I certify that the preceding sixty-eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 30 September 2011